The FCA has made a U-turn on plans to introduce mandatory call recording for telephone exchanges between financial advisers and their clients.
In place of compulsory call-recording, the regulator has proposed that “irrespective of size”, Article 3 firms must adhere to the “at least analogous requirement”, which means firms will be permitted to take notes of conversations where necessary.
Announced as part of its recent Mifid II policy statement, the FCA suggested the decision to amend its approach to call recording was based on the fact that “a full taping obligation may not always be proportionate” for certain firms.
The regulator originally proposed extending taping legislation being introduced by Mifid II on a broader basis, encompassing Article 3 firms (for example, financial advice firms and boutique corporate finance firms).
Alan Solomons, director at London-based Alpha Investments and Financial Planning, said the FCA failed to communicate the benefits of call recording adequately when it originally proposed extending taping rules last year.
“I don’t think they got the benefits of call recording across to people. Many basically saw it as a step too far, or that it meant extra work for them,” Mr Solomons explained.
Mr Solomons, who uses call recordings himself, said the practice had proved itself worthwhile.
He said: “some years ago a client said – or at least I thought he said – ‘I want low risk’. Later it transpired that he claimed he wasn’t saying low risk, but ‘no risk’. Now, if your notes say one thing and the client tells you another, and then you end up going to court, who’s right?”
Aside from this protective aspect, Danny Cox, head of communications and a chartered financial planner at Hargreaves Lansdown, suggested that one of the other benefits of call recording was its capacity to improve advisers’ performance.
Mr Cox said: “Hargreaves Lansdown record calls anyway. We have done for years. There’s a benefit to us in that we can go back to these calls and listen out for training opportunities or development needs.
“For the last few years, we’ve also been recording client meetings with advisers. That works on a number of levels: protection for the consumer, for the investor and in helping the meeting itself because the adviser can just record [without taking] huge quantities of notes.
“It makes for a much more engaged conversation between the investor and the adviser.”
The original announcement of call recording rules was met with the suggestion that it would put undue financial strain on smaller firms – a claim that Mr Solomons rejected.
He said: “I think it probably was an extra cost years ago. I’ve got some old equipment that cost me £150 some time ago, but that’s history now.
“You can download various apps on your smartphone and use them for nothing, or you can pay something like £5 as a one-off payment and then hey presto, you’ve got a recording app.”
kuba.shand-baptiste@ft.com
